Europe Fintech

Fintechs Say COVID Recovery Must Be Put on a Sustainable Footing in UK Spring Budget Predictions

Ahead of the Spring Budget, GovGrant, the R&D and IP specialists, calls on the Chancellor Rishi Sunak to realise the opportunity place Britain’s economic recovery from COVID-19 onto a more sustainable footing.

According to GovGrant, if the Budget is to provide a sustainable foundation for the long term prosperity of the UK, it must be:

Geographically and demographically even

The Spring Budget marks the first opportunity for the Government to put some real fiscal meat onto the bones of their levelling up agenda. COVID-19 has fundamentally altered people’s working lives, which includes lessening their reliance on physical office spaces, which in turn has lessened the focus on cities and, in particular, London. Government spending needs to reflect this, ensuring support for businesses right across the country.

HM Revenue and Customs’ (HMRC) Patent Box data shows disproportionate spending in London and the South compared northern regions. Roughly £50M in funding was claimed by SMEs in the North East, compared to roughly £190M in the South East and £500M in London. Funding will be recorded where the company is headquartered, accounting for some of the additional funding being allocated to the Capital, but the disparity is still clear and must be addressed to ensure an equal economic recovery and maintenance of support in the red wall.

Supportive of a more collaborative relationship between the public and private sectors

The Government’s pandemic response to date has provided two compelling examples of how a nimbler approach to regulation and a re-framing of how the public and private sectors engage to support the economy: the deployment of supporting funds through the British Business Bank; and the rapid approval of the COVID vaccine. GovGrant is urging the Government to learn from these experiences and allocate sufficient funding for the public sector to play an active role in the COVID response, supporting rather than blocking British businesses.

Cost-Effective

Government funding baked into the Budget must also be structured to encourage businesses to invest in their own innovation within the UK rather than granting more government-funded cash injections that are too focussed on short-term survival. Doing so would have invaluable advantages for businesses including opening up additional revenue streams and attracting further investment from more sustainable sources. It’s also better for the UK economy – investing 2.4% of GDP into R&D would create an additional £180bn of GDP by 2040.

Luke Hamm, CEO at GovGrant, said“We need to hear an optimistic, future-focused Budget, not one concentrating solely on short-term recovery. The pandemic has highlighted the agility of the British Business Bank, used by the Chancellor to deploy billions of funding to desperate businesses, but it has also shown the need to reform the bureaucracy inhibiting government bodies such as Innovate UK. The positive news is that the Budget presents an opportunity for the Chancellor to do just that.

“Brexit and Covid-19 have drastically affected our economy, but implementing measures that drive a sustainable long-term recovery is the only way forward. As it stands only 15% of UK SMEs think the government encourages innovation, so all eyes will be on March 3rd to see if this is prioritised.”

Kevin Sefton from untied, the UK’s personal tax app, has also set out what he thinks will be tackled in this year’s Budget.

He said: “The Chancellor Rishi Sunak faces a difficult dilemma at the beginning of March for his Budget. On the one hand he has a bill of at least £300bn from Coronavirus support measures to pay for, on the other he doesn’t want to break the Conservatives’ 2019 election manifesto promise not to increase income tax, national insurance or VAT rates.

“Despite the fragile state of our economy and the fact that we are unlikely to see significant tax increases, we do believe there are key focus areas where there may well be movement. These will be centred around the COVID-19 response, general rate-driven decisions (main areas of change are likely to be around corporation and capital gains tax), tax system changes and ‘hidden’ taxes.

“One thing that non-PAYE workers need to watch out for is a potential increase on national insurance contributions for the self-employed and possible new measures aimed at company directors. When he introduced the self-employed income support scheme, back in March 2020, the Chancellor said: “It is now much harder to justify the inconsistent contributions between people of different employment statuses. If we all want to benefit equally from state support, we must all pay in equally in future.” This potentially signals a desire to do something about the perceived disparity between national insurance rates, or dividend tax rates, between the self-employed, company directors and those who are employed under PAYE. The Chancellor might use this budget as an opportunity to attempt to address this, perhaps at the same time as extending SEISS support to some of those groups who have previously been excluded.”

Author

  • Polly is a journalist, content creator and general opinion holder from North Wales. She has written for a number of publications, usually hovering around the topics of fintech, tech, lifestyle and body positivity.

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